Preparing a Budget

Some of the questions to ask when you are deciding to stay home with the bub are purely practical.

• can you afford to live on one income instead of two, with the additional expense of a baby?
• are you prepared to accept the lifestyle change a reduced income will bring?

If there is any uncertainty here, the best thing to do is to get back to basics and do a budget.

Work out how much you spend and how much you earn over the year.

If the kids are already here, you'll be including their costs. If baby is on its way, you'll need to estimate some of the day to day baby costs, but don't forget, you'll also save on dinners out and trips to the cinema, unless you are very lucky and have built in babysitting.

Budgeting instructions:

Gather together details of your expenses - use past credit card statements, bank statements, receipts and household bills.

If you are not in the habit of keeping these, you will need to do so for at least a few months in order to get an accurate picture of your spending.

Using the Budget Planning Form as a starting point, make a list of all your expenses. These will be split into:

• regular week to week 'smaller' expenses e.g. traveling expenses, lunches, coffees
• day to day living expenses such as grocery bills and petrol
• regular payments e.g. mortgage or rent, rates payments, utilities, phone etc
• once a year payments such as car registration and associated costs, or home and contents insurance
• personal expenses such as clothes, hairdressers, gym membership
• others such as birthday and Christmas expenses

Often the hardest thing to keep track of are cash expenses. If you know you take out $200 per week in cash, but you can only allocate $170 to known expenses, just add an extra line for $30 in other cash expenses. These might have been kids ice creams, those $2 rides in the shopping centre, money in a charity box or DVDs you forgot you'd hired.

If you're not happy that you've got an accurate budget, try keeping a diary note of everything you've spent for a week or two. It will take surprisingly little time and may surprise you with the outcome!

Once you have gathered all the information, fill out a Budget Planning Form.

I have tried to include as many items as I can think of but there will be items that are not relevant for you and extras you need to include. Hopefully this provides a good starting point.

Some expenses will be weekly, monthly, or one off yearly. Put them in the relevant column and once you have listed all expenses, convert each to a common time period. e.g. multiply weekly expenses by 52 to get a yearly expense. Multiple monthly by 12 to convert to yearly.

If your income is monthly, converting everything to monthly might be most practical. e.g. Weekly to monthly: multiply by 52 and divide by 12

Add up all your expenses per month, or per year, whichever you have decided.

Then work out your income, remembering additional income such as interest income or benefit payments. Click here for info on Government benefits.

Obviously, your total income minus your expenses equals any savings you are able to make.

If you have done this exercise using both incomes, you can then remove your income to see whether your partner's income alone will meet your current expenses.

What if you just cannot afford to stay home with the baby?

Some companies have paid maternity leave, but I believe these are still in the minority. Therefore you and your partner need to have saved enough money to cover your ongoing expenses during your break from work.

The baby bonus will help with this but only goes so far when you have all those baby things to buy.

If you are expecting gifts or having a baby shower, ask for what you need. You don't want to end up with excess soft toys and not enough of the basics. Or get people to club together and give you a gift certificate so you can buy what you need.

Do you know whether you are entitled to a parenting payment from the government? This used to be split into part a and part b, with part a being means tested and part b being dependent solely on the mother's income. The current government have changed this so part b is also means tested, but it's worth checking it out to see if you are eligible.